what is the federal open market committee | FOMC: Definition
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what is the federal open market committee | FOMC: Definition


The US Federal Reserve, is the most important
central bank in the whole world. Remember that all the other central banks
across the western world and the world in fact are watching the Federal Reserve before
making their own policy decisions. So all eyes really are on the Fed and remember
with the US dollar being the most traded currency in the world and it comprises of around 70
percent of all transactions on a given a debt on a given day. It’s no surprise that the Federal Reserve
is really closely watched because it’s just such an influential central bank. In the Federal Reserve there’s a group called
the Federal Open Market Committee. You’ll hear them referred to as the FOMC. This group consists of seven governors from
the Federal Reserve Board and five presidents from the twelve District Reserve banks. They aim to get long-term price stability
and long term growth and they meet to discuss monetary policy and to change it about eight
times a year. Again like most central banks they have a
website and you can go to the central bank’s website here, federalreserve.gov and you can
see the stated aim of the Federal Reserve. The central bank of the United States provides
the nation with a safe flexible and stable monetary and financial system. If you go to news and events and you go to
press releases and then, if you click, click the monetary policy tab, you then see the
monetary policy meetings and the rate statements. So that was the last rate statement on the
13th of June. You just click on that and you can read the
rate statement that was made and they you can see that, they raised the fund rate to
1-3/4 to 2%. So there was a rate increase that was an expected
event. Another useful tool when considering the Federal
Reserve interest rates is something called the countdown to FOMC. It’s the CME groups Fed watch tool and you
can access it here using this website. If you just Google CME Group trading interest
rates. You know FOMC something like that you should
hit it and it looks like this and this tool. It’s got a user guide a video demo, exactly
how you can use it but essentially what it does it. It’s very useful because it lets you know
what the probability of the rates being increased. So the current target rate is 1.75 to 2%. We’ve got that there and you can see that,
that’s what it’s expected to remain out in August. Now if you look in September, just click on
September, what they’re expecting here is they’re expecting, there’s a 71 percent chance
of a target rate to be increased to 2 to 2.25 percent. So you can see that an interest rate is expected
for September and then you can go from November and you can see. You know there’s a 5.1 cent, probability that’s
another interest rate rise and it’s almost you know 40%, whether it’s increased a further
2.25 to 250 or remains at that 2 to 2.25. So you can see by looking at this tool what
the probability and expectations are for the interest rates and that’s a very helpful tool
as a trader because if some information comes out that radically affects those expectations. You’re gonna see the US dollar having its
value. It’s going to be changed and affected by these
expectations.Okay, that’s the Federal Reserve, the most popular and most closely follow central
bank in the whole world and that is the FOMC CME Fed watched all worth having on your radar
and looking at when you’re considering the Federal Reserve.

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